Tiger Line

Market Scorecard

Global stocks rose on Monday in those markets that were open, but it was a very slow news day. Wall Street was closed for the Juneteenth US federal public holiday. Rising interest rates have dampened interest in speculative "assets" like Bitcoin, which is hovering around the $20 000 mark, down about 70% from its November highs.

Speaking of cryptocurrencies, one of the largest lenders in that arena, Celsius Network, hasn't let users withdraw funds for over a week. Elsewhere, another high-flying crypto operator Babel Finance told customers that it was suspending redemptions from all its products, saying they're facing "unusual liquidity pressures." What a mess. Of course, crypto markets don't have a central bank to back them up, so it's game over for many.

Yesterday, the JSE All-share closed up 1.47%.

One Thing, From Paul

There's a massive US hedge fund which had $23 billion under management at the end of 2021, that's down over 60% this year.

Tiger Global was founded by 46-year-old Chase Coleman and 44-year-old Scott Shleifer (pictured right and left below). The firm focuses on the tech sector, and they also take stakes in private companies and start-ups.

Tiger adds leverage to their funds, with derivative-based long and short positions. They charge eye-watering performance-based fees, so the managers gobble up 20% of any upside. Coleman and Shleifer have made themselves multi-billionaires over the last two decades. Both own extensive personal property portfolios, but also have a lot of their own money invested in their own funds.

Founded in 2001, Tiger's main hedge fund has generated average annual returns of about 16% for early investors. For the record, that's about the same as the returns that Vestact has generated for clients who joined us back in 2005. On top of performance fees, they also charge admin fees of 1.5% per year, but have cut those to 1% after the recent rout. Our fees have always been a flat 1%, and that won't change.

We are working hard, doing our best, trying to help you get rich slowly. We do that by focusing on solid stocks, and avoiding high fees, gearing or excessive risk-taking. We're also having a bad year, but not as bad at those guys, or their clients.

Byron's Beats

Making macro calls is very difficult. There are so many moving parts that impact an economy. Not to mention the unknown unknowns that disrupt global affairs from time to time. A prolonged war in Eastern Europe is a good example.

What is even more difficult, is making money out of macro calls. For example, you might have correctly predicted high inflation for the better part of 2021 and 2022. To hedge yourself you could have bought gold or even worse, Bitcoin. Gold is flat for the year and Bitcoin has been crushed. Despite being right about your macro call, you would have still lost a lot of money.

Another good example was the US election in 2016. Many people thought that if Trump won, the market would collapse. When Trump did win, the market dropped for about 3 hours, but then surged higher. You may have correctly predicted the election result but been completely wrong on the market's reaction.

There are funds that try to make money from predicting macro events, but we do not play that game. Our strategy has always been clear: accumulate shares in quality companies and own them through thick and thin. It is what we know and what we are good at.

Michael's Musings

Discovery Bank (JO:DSBPp) made two announcements yesterday. The first is that they've reached 1 million active bank accounts, across 450 000 clients. Their goal is to reach break-even in the next two years with at least 600 000 clients. To assist growth, they announced a new account with zero monthly fees. The goal is to get people to sign up, and then to shift all of their banking across to Discovery.

Building out the bank has been a long hard slog for Discovery, and massively expensive. If they had the chance to wind back time, I wonder if they'd still launch the bank?

The second announcement was that Discovery Bank will offer "Pay-as-you-Gym" functionality to account holders. I think this is a great idea. It serves Discovery's goal of making people healthier and the gyms will hopefully get more foot traffic. Each gym visit will cost between R75 and R100, and clients can access over 170 Virgin Active and Planet Fitness gyms around the country.

I currently pay around R400 a month for my gym membership, and in most months I don't reach four visits. Maybe it's time I get a Discovery Bank account and switch to this Pay-as-you-Gym system?

Bright's Banter

SoftBank (TYO:9434) has announced a new plan to cash out its stake in chip designer ARM. Part of their holding might be heading back to the London Stock Exchange, along with a listing in New York.

SoftBank bought ARM for $32 billion in 2016 and it has grown aggressively since then to be a top contender in the chipmaking space. Softbank seems to think that the whole of ARM is worth at least $60 billion, which is a big ask considering all of tech is in a bear market. That's more than Nvidia was going to buy it for before regulators blocked the transaction.

ARM's main operations include selling and licensing technology used by semiconductors makers. ARM-designed chips end up in everything from smartphones to server farms and supercomputers.

Let's see if SoftBank goes ahead with the plan and whether Mr. Market agrees with their valuation expectations.

Signing Off

Asian shares are up this morning, with the MSCI Asia-Pacific index finally snapping an eight-day slide. Hong Kong and Japanese markets led gains, while mainland China was a bit subdued as traders assessed the impact of new Covid outbreaks.

US equity futures are pointing nicely higher in early trade. Investor sentiment seems steadier, compared to last week. The Rand is trading at around R16.00 to the US Dollar.

Keep moving forward.

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